5 ms·

What has been the cost of this regulation as a whole on the entire banking industry? Lets get that number and compare.

deleted 9y ago
[deleted]
jhwang5 9y ago
wait, so suppose regulation costs financial firms too much, you'd rather have no recourse to getting reimbursed as an individual?
- jack_h 9y ago
  I'm guessing the argument is that if the cost that the customer bears for such regulated audits is greater than the refund they get from it then the customer actually lost money.
  - chillwaves 9y ago
    That sounds kind of like me complaining about the cost of my car insurance because for 10 years I didn't have any accidents. Seems difficult to know the benefit of such regulation without hindsight. Secondly, businesses face market pressures to provide low cost to customers (isn't that the whole argument for the free market?) therefore passing the cost to the customer should be weighed against other potential inefficiencies -- they might even have to take a smaller cut of profit! Funny how so many people can never justify the cost of doing business when it comes to protecting consumers.
- conanbatt 9y ago
  Whats your recourse to getting reimbursed for a regulation that is too expensive?
  - toomuchtodo 9y ago
    Superior to getting reimbursed when there is no regulation whatsoever. See: Equifax data breach costs shouldered by the American public who have no resource provided by regulation
    - conanbatt 9y ago
      Superior? Which recognized bad regulations did you get your money back from?
      - toomuchtodo 9y ago
        That's the point. Regulation > No regulation. We're just arguing the amount of said regulation.
        conanbatt 9y ago
        I don't think you are reading my comments. You say that without regulation you wouldn't have a recourse to get your money back on bad behavior from private companies, but if a regulation harms you economically, you will never get your money back anyway. Regulation does not give you a recourse to get your money back. In fact, even worse. The state can never make amends on its mistakes.
        toomuchtodo 9y ago
        Let me twist an analogy. I don't care if law enforcement is more expensive than just absorbing the cost of crimes. I want the rule of law enforced, even if it's more expensive.
        conanbatt 9y ago
        Thats fine. You go your way and let other people go their way and everyone gets what they want.
        9y ago
ivraatiems 9y ago
The cost to who? The banks who have to follow them? Or to consumers of the services they impact? It's not a fair comparison. The purpose of regulation in this case is to protect consumers of bank services - including other banks. Those costs are only calculable if you know the full scope of the bad behavior, which, without appropriate regulation ensuring reporting and review, you can't. Of course, if you don't believe banks ought to be regulated in order to protect their customers, it doesn't matter. But that's a different conversation.
- conanbatt 9y ago
  If you cant know, then you can never make the claim that the regulation is good, which is what OP said.
  - ivraatiems 9y ago
    That isn't what I said. I said you can know. But only if you provide some amount of regulation to mandate reporting of reliable information. The claim is actually the opposite: You can never make the claim that no regulation is good, because you don't know what you don't know. (But you absolutely can still make that claim, in fairness; you just can't base it on a cost-benefit analysis from the customer's perspective.)
    - conanbatt 9y ago
      The burden of proof is on the creation of regulation, because it requires active effort to implement and maintain. The OP said that this shows why regulation gets good results, and I challenge the evaluation by saying we have seen the benefit of this particular regulation, but not the cost. You argue that is hard to know both the cost and the benefit of regulations. I argue that if you cant gauge it, then you can never conclude if its good or bad. I rather put the responsibility of proving itself to the guys with the battons.
      - ivraatiems 9y ago
        > You argue that is hard to know both the cost and the benefit of regulations. I argue that if you cant gauge it, then you can never conclude if its good or bad. Here's where the trick is. I'm not saying "you can't gauge it"; you even acknowledged in the previous sentence that that's not what I'm saying. I'm saying it's complex, because in order to gauge it, you must have some of it, otherwise there is no way to produce reliable metrics. Yes, that requires incurring some cost. But the risk of much higher costs comes down dramatically once the initial cost is paid, because the information it provides makes us able to avoid greater costs down the road. What you're saying is that if we can't build a tower all in one go, we can't build it at all. I'm saying we can do it in reasonable stages, but we have to lay a strong foundation first.
rz2k 9y ago
I know that on HN it often can not be left unsaid that the financial industry has a net benefit on the economy and on society, but I don't think it can be easily assumed that the cost of complying with such regulation makes the banking system less efficient, even if the cost of compliance is many times the fines that end up being paid out. Banks ultimately compete with each other, and there is inevitably an information asymmetry between banks and their clients. A good faith bank will lose out to banks that "accidentally" employ dark patterns against their customers, if the customers are unaware that they are being cheated, or if the costs of remedies are more expensive than the damages. People often talk about the value of assuming positive intent on Hacker News. I agree with this in principle, but I also think it is important to create an environment where people acting in good faith are rewarded with not having to waste their time thinking up schemes to compete with dishonest competitors. The bias toward assuming incompetence and honest mistakes over ill intent unfortunately gives cover to people who employ plausible deniability to cover intentional fraud. Cell phone companies, cable companies and utilities make billing errors far too often to plausibly credit honest mistakes alone. At least in their case they don't already have direct access to your assets in the way that banks do.
pasbesoin 9y ago
Regulation tends to enforce responsible behavior, which is actually a long term benefit to an organization. In other words, it tends to put a brake on the most egregious of the self-serving greed that turns into scandals and damages that destroy businesses. When it is effectively written and enforced. People talk about costs -- often like every cost is bad. Having worked in accounting for a while, I can say that it was sometimes an uphill battle to get people to do things right. Having rules -- internal and external -- helped in that regard. A resulting benefit? Management actually knew the real state of the books, and could operate accordingly on that basis. And, those precious banks were less likely to get ripped off by mis-representations. Regulation's not bad. Crap regulation -- laws and rules and enforcement -- is.
csomar 9y ago
Apples and Oranges. This eats on their profits not on your pocket. Also remember, if we let them get away with it, it'll get worse. Like really much worse.
- conanbatt 9y ago
  Really, the regulators salary is paid by the bank's profits and not taxes? And the decreased supply due to regulation is also paid by the banks, not by the consumers?
dv_dt 9y ago
This can lead to a fundamentally misconstructed comparison. Cost savings recovered can be estimated but you can't really estimate what customer costs it headed off. If it cost $1M of compliance, but successfully caused banks to avoid behavior that would have cost $100M to customers, that would be great. But, you only get visibility on recovery from violations. So you have at least a three term cost balance, for which only two terms are even visible.

deleted 9y ago

[deleted]

wait, so suppose regulation costs financial firms too much, you'd rather have no recourse to getting reimbursed as an individual?

jack_h 9y ago
I'm guessing the argument is that if the cost that the customer bears for such regulated audits is greater than the refund they get from it then the customer actually lost money.
- chillwaves 9y ago
  That sounds kind of like me complaining about the cost of my car insurance because for 10 years I didn't have any accidents. Seems difficult to know the benefit of such regulation without hindsight. Secondly, businesses face market pressures to provide low cost to customers (isn't that the whole argument for the free market?) therefore passing the cost to the customer should be weighed against other potential inefficiencies -- they might even have to take a smaller cut of profit! Funny how so many people can never justify the cost of doing business when it comes to protecting consumers.
conanbatt 9y ago
Whats your recourse to getting reimbursed for a regulation that is too expensive?
- toomuchtodo 9y ago
  Superior to getting reimbursed when there is no regulation whatsoever. See: Equifax data breach costs shouldered by the American public who have no resource provided by regulation
  - conanbatt 9y ago
    Superior? Which recognized bad regulations did you get your money back from?
    - toomuchtodo 9y ago
      That's the point. Regulation > No regulation. We're just arguing the amount of said regulation.
      - conanbatt 9y ago
        I don't think you are reading my comments. You say that without regulation you wouldn't have a recourse to get your money back on bad behavior from private companies, but if a regulation harms you economically, you will never get your money back anyway. Regulation does not give you a recourse to get your money back. In fact, even worse. The state can never make amends on its mistakes.
        toomuchtodo 9y ago
        Let me twist an analogy. I don't care if law enforcement is more expensive than just absorbing the cost of crimes. I want the rule of law enforced, even if it's more expensive.
        conanbatt 9y ago
        Thats fine. You go your way and let other people go their way and everyone gets what they want.
        9y ago

ivraatiems 9y ago

The cost to who? The banks who have to follow them? Or to consumers of the services they impact? It's not a fair comparison. The purpose of regulation in this case is to protect consumers of bank services - including other banks. Those costs are only calculable if you know the full scope of the bad behavior, which, without appropriate regulation ensuring reporting and review, you can't. Of course, if you don't believe banks ought to be regulated in order to protect their customers, it doesn't matter. But that's a different conversation.

conanbatt 9y ago
If you cant know, then you can never make the claim that the regulation is good, which is what OP said.
- ivraatiems 9y ago
  That isn't what I said. I said you can know. But only if you provide some amount of regulation to mandate reporting of reliable information. The claim is actually the opposite: You can never make the claim that no regulation is good, because you don't know what you don't know. (But you absolutely can still make that claim, in fairness; you just can't base it on a cost-benefit analysis from the customer's perspective.)
  - conanbatt 9y ago
    The burden of proof is on the creation of regulation, because it requires active effort to implement and maintain. The OP said that this shows why regulation gets good results, and I challenge the evaluation by saying we have seen the benefit of this particular regulation, but not the cost. You argue that is hard to know both the cost and the benefit of regulations. I argue that if you cant gauge it, then you can never conclude if its good or bad. I rather put the responsibility of proving itself to the guys with the battons.
    - ivraatiems 9y ago
      > You argue that is hard to know both the cost and the benefit of regulations. I argue that if you cant gauge it, then you can never conclude if its good or bad. Here's where the trick is. I'm not saying "you can't gauge it"; you even acknowledged in the previous sentence that that's not what I'm saying. I'm saying it's complex, because in order to gauge it, you must have some of it, otherwise there is no way to produce reliable metrics. Yes, that requires incurring some cost. But the risk of much higher costs comes down dramatically once the initial cost is paid, because the information it provides makes us able to avoid greater costs down the road. What you're saying is that if we can't build a tower all in one go, we can't build it at all. I'm saying we can do it in reasonable stages, but we have to lay a strong foundation first.

rz2k 9y ago

I know that on HN it often can not be left unsaid that the financial industry has a net benefit on the economy and on society, but I don't think it can be easily assumed that the cost of complying with such regulation makes the banking system less efficient, even if the cost of compliance is many times the fines that end up being paid out. Banks ultimately compete with each other, and there is inevitably an information asymmetry between banks and their clients. A good faith bank will lose out to banks that "accidentally" employ dark patterns against their customers, if the customers are unaware that they are being cheated, or if the costs of remedies are more expensive than the damages. People often talk about the value of assuming positive intent on Hacker News. I agree with this in principle, but I also think it is important to create an environment where people acting in good faith are rewarded with not having to waste their time thinking up schemes to compete with dishonest competitors. The bias toward assuming incompetence and honest mistakes over ill intent unfortunately gives cover to people who employ plausible deniability to cover intentional fraud. Cell phone companies, cable companies and utilities make billing errors far too often to plausibly credit honest mistakes alone. At least in their case they don't already have direct access to your assets in the way that banks do.

pasbesoin 9y ago

Regulation tends to enforce responsible behavior, which is actually a long term benefit to an organization. In other words, it tends to put a brake on the most egregious of the self-serving greed that turns into scandals and damages that destroy businesses. When it is effectively written and enforced. People talk about costs -- often like every cost is bad. Having worked in accounting for a while, I can say that it was sometimes an uphill battle to get people to do things right. Having rules -- internal and external -- helped in that regard. A resulting benefit? Management actually knew the real state of the books, and could operate accordingly on that basis. And, those precious banks were less likely to get ripped off by mis-representations. Regulation's not bad. Crap regulation -- laws and rules and enforcement -- is.

csomar 9y ago

Apples and Oranges. This eats on their profits not on your pocket. Also remember, if we let them get away with it, it'll get worse. Like really much worse.

conanbatt 9y ago
Really, the regulators salary is paid by the bank's profits and not taxes? And the decreased supply due to regulation is also paid by the banks, not by the consumers?

dv_dt 9y ago

This can lead to a fundamentally misconstructed comparison. Cost savings recovered can be estimated but you can't really estimate what customer costs it headed off. If it cost $1M of compliance, but successfully caused banks to avoid behavior that would have cost $100M to customers, that would be great. But, you only get visibility on recovery from violations. So you have at least a three term cost balance, for which only two terms are even visible.